Stocks forming a base

Good day all,

Bernanke has spoken, and now the much anticipated – and expected – “quantitative easing 3” is confirmed. EURUSD flew skywards (managed to grab some pips there), gold continued higher as well, and of course, stock indices surged up. Chart-wise, all these assets look more bullish, though it will be wiser to wait for pullbacks for longer-term trades. For today, however, I will be looking at some local counters that have been “forgotten” by the market in the last year or so.

  

All these charts look similar to me. These counters started getting hammered about 2 years back. It was only several months ago that the market decided these stocks have been battered enough, and a clear support zone emerged. These stocks continued to swing, but generally we see them as consolidating after a major trending phase. One technical indication of this floor is the proximity of the 50-day MA to the 200-day MA, and how they seem to be converging.

The conclusion I have come to is that these stocks are building a solid base. So, the ultimate question in our minds: up or down? As a breakout trader/trend follower, I always wait for the move before reacting. Which means to say, while I am favouring the bullish side, I have no choice but to wait for confirmation. In Noble’s case, the recent uptick has caught my attention. Look at the chart above again, I drew trendlines that suggest a possible upward breakout from a descending triangle.

As the months pass, I will continue to look out for stocks forming a base. These are stocks I will keep in view (kiv) for longer-term trend trades.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Advertisements

2 Comments

  1. winston
    Posted September 18, 2012 at 3:40 PM | Permalink | Reply

    so if the 50-day MA cuts above the 200-day MA, that’s a bullish sign right?

    • Administrator
      Posted September 18, 2012 at 6:33 PM | Permalink | Reply

      Yes. They call it a “golden cross”. Supposed to be a very accurate signal.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: